Twice finance minister, once under ex-PM Atal Behari Vajpayee and earlier during Janata Party rule, Yashwant Sinha has left an indelible stamp on the Indian economy. Sinha, whose son Jayant is MoS finance, finds Arun Jaitley’s budget pro-corporate while neglecting BJP’s key constituency, the middle class. Excerpts of a phone interview with Pragya Singh.
Why do you think the budget fell short of pleasing the middle class?
The middle class, particularly income-taxpayers, look forward most to higher exemption limits, this time, from Rs 2.5 lakh to Rs 3 lakh. This was also recommended by the standing committee on finance I chaired in the last Lok Sabha. It made two related suggestions. One, to tax income from Rs 3 to Rs 10 lakh at 10 per cent, from Rs 10-20 lakh at 20 per cent and above Rs 20 lakh at 30 per cent. Two, instead of tinkering with rates, I had suggested linking exemptions and slabs to inflation—the consumer index. This would be like government servants’ dearness allowance, automatically updating every year and putting more in people’s pockets when necessary. The BJP’s manifesto also suggested that the exemption should be Rs 3 lakh, so that’s one disappointment.
The party’s election manifesto had also promised sweeping tax reform...
That’s why it is disappointing; especially in view of the fact that the corporate sector has been given a tax break of five per cent, from 30 per cent to 25 per cent.
Twenty-five per cent is compatible with ASEAN rates, but many companies pay much less. Won’t they be unhappy?
The corporate sector may have its own issues and is waiting for the fine print of implications. But the impression has already gone out that the corporate sector has got a major tax break in the budget while the small income-taxpayer has been neglected.
The same holds for home buyers...
People expected housing loans would become more affordable. The present set-off of Rs 2 lakh on housing loan interest is too low. Given the situation in the real estate market, much more needed to be done.
Was the middle class neglected for reasons of economy, or does the budget lack political intent towards them?
I’m sure the government will explain what really happened. I’m hoping that discussions will take place in Parliament on this issue.
Sweeping changes in criminal laws to tackle black money are proposed—do you support provisions like a jail term of 7-10 years?
On this front, the only response from the government is for it to assure that the provisions will not be misused, given their scope. Otherwise, these penalties will not come a day too soon. We have to put the fear of god in people who stash black money overseas, who don’t declare wealth.
Will it work, considering GAAR (General Anti-Avoidance Rules, stricter anti-evasion disclosures) has been put off for two years?
GAAR should have been included in the finance bill. Every developed economy has GAAR and widespread evasion in our system means that this rule is needed; it’s not like we have many other tools to tackle black money. With adequate safeguards, GAAR should have become law. Attracting foreign investment is fine, but we should not be so scared of foreign investors that we don’t bring strong laws in our own country.
You are critical of your own party’s budget; and your son is minister of state, finance.
I am not critical of the budget. These are my feelings and suggestions. The finance minister will have opportunity to receive suggestions and make amendments in the budget session; I hope some of mine will be considered. The budget is pro-growth and also proposes an umbrella of social security.
As FM, you supported worker protection. This budget makes EPF savings optional.
I have no great issue with this. It signals a move to the New Pension Scheme, in which many things are ‘settled’. Earlier, trade unions resisted changes in investment criteria for social security schemes. Now employees can choose how much market exposure they want.